PEST Analysis UK Cycling Market for Bianchi Company - Case Study Example

PEST Analysis UK Cycling Market for Bianchi Company By al Affiliation Introduction Any organization is influenced by different conditions, events, entities, factors, and conditions that affect its decisions and undertakings. External environment includes micro and macro environments. The micro environment defines the operating conditions which are suppliers, customers, competitors, intermediaries in the market, and the public. For the general or macro environment the major considerations are political, technological, natural, economic, social-cultural, demographic, and international factors. The reasons for emphasis on external environment include promoting strategic thinking for business management teams, and reveals potential threats around a project to be undertaken by a business. Additionally, understanding the external environment not only makes a business adopt a culture of anticipating hard times in the future and proactively minimize the associated impacts, but also identify opportunities and exploit them. Thesis This paper explores the macro external environment in terms of political, economic, social, and technological factors or PEST analysis and their application in Bianchi Company. Definition of PEST and its usefulness to Bianchi Company’s analysis of external environment regularly As a business tool, PEST analysis is used in business development decision making and assessment, and as a marketing tool. Currently, Bianchi seeks to expand into the UK market. However, a UK presence requires understanding the macro external environment such that the company not only gets into a new market, but also gains new customers in that market (Carpenter & Dunung, 2012). Through the use of PEST analysis, Bianchi is bound to understand the UK market in terms of its accessibility, operation costs, practices and needs of the buyer, and potential size. For Bianchi, the decision to get into the UK is based on hearsay, and is not sufficient evidence, hence must be complemented using interviews with industry experts and potential customers. Additionally, PEST analysis will provide critical information on cultural trends, changes in economic factors and their implications for profitability, the attitude of the market towards bicycles, and threats of new entrants into the market, and learn the needs of the foreign market. Four Dimensions of PEST Analysis Political factors Political factors are associated with the extent of government intervention in the external business environment. Common and crucial government interventions are laws such as tax and labor laws, trade tariffs and restrictions, and other regulations. When exposed to political factors, business aspects mostly affected are communication and management performance. Any communicator in the business field must ensure that they are acquainted with great research methods such that they define their stand and formulate the necessary strategy to improve the circumstances. Other factors likely to influence the business functioning within the political arena are goods and services the government is to provide, expects to be provided or does not want provided. The goods prohibited by the government are either in the form of merit bad, or demerit goods. This understanding requires that businesses have a greater understanding that the government is free to regulate health, infrastructure, and education, and businesses are left to make adjustments to fit. Economic factors Economic factors are linked to the rate of inflation, monetary growth, exchange rates, and rates of interests. When exposed to these conditions, businesses experience the implications in their functioning and decision making. For instance, the extent to which a business expands or grows is dependent on the present interest rates and so is the firm’s capital. Additionally, the exchange rates influence the export costs and the prices of imported commodities. For any business, understanding these impacts is crucial for the business marketing strategy, management, and public relation. Social Factors Trends in social factors are known to influence firm products’ demands or the demand for an organization. In return, these trends affect the manner in which a firm operates. The most influential social factors are age distribution, health consciousness, population growth rate, and attitudes towards careers. For instance, a firm’s operation is affected by the aging population since this translates to less willing employees. Consequently, the firm experiences higher costs of labor and changes in management strategies to accommodate the older workforce. An older workforce would also mean that the firm adopts a better public relations strategy such that audience bias is eliminated given the workforce diversity that causes cultural variations and norms. Technological Factors Finally, exposure of an organization to technological factors introduces barriers to communication strategy entry, affects outsourcing, and impacts the extent of efficient production. For instance, the introduction of a new technology would mean that a firm has its operation or understanding influenced. This can also affect a business in terms of its innovation, quality, and costs. The best understanding of technological factors requires that the target audience or market position is identified such that efficient marketing strategies are deployed. Findings of PEST analysis of UK market for Bicycle Business Venturing into the UK market requires that Bianchi understands the political, economic, social, and technological factors that will affect its operation in general. Political factors Currently, Inman (2014) reveals that political risks are higher, especially for international businesses aiming at investing in the UK market. These risks arise from preparations for the 2015 elections and the anticipated numerous EU referendums. Tax incentives Conversely, Allan (2012) reveals that the UK market is adopting friendly tax incentives for proven employer and employee cycle-friendly nature. The incentives are adopted in appreciation of reducing congestion and reducing pollution to the environment while providing a convenient way to get to work. Additionally, England provided about €94 in support of the establishing new and improving exiting cycling routes which was anticipated to extend even to the rural areas (Hill, 2013). Labor laws The UK labor laws are influence the workplace as employers have to develop policies that inform employees of the reduced barriers to owning one’s bicycle that they can use to get to work (Kramer & Goodwill, 2012). Some information would be tips on safe cycling, bike registration, and best locking practice. Employers could then have to set a space apart for bicycle parking. Government Investment According to the department for transport (2013, p. 6), UK government’s investment in promoting cycling is a strategy ending in 2015 after which cycling will have been adopted in cities like Birmingham, Leeds, Norwich, Oxford, New Forest, Cambridge, Bristol, and Dartmoor among other cities. In London, the cycling vision is anticipated to translate to additional people travelling by bike, safer streets for bikes and everyone in general. Economic factors Inflation Rates According to Inman (2014), an economic correspondent with The Guardian, the current state of most UK middle income families is limited disposable incomes. This is because most of the average families live below inflation and the situation is only likely to change by 2015. Inman also highlights that rising above inflation will barely become positive during these first years since anticipations indicate that the living standards as of 2017/18 will be much lower than what it was prior to the 2008 recession. Investment costs are also expected to rise upon the approval of plate numbers to curb misconduct among riders (Burgess, 2014). Additionally, high inflation rates are responsible for high prices of commodities and raw materials, which in the UK is high given the gradual decline in inflation since 2009 (BBC, 2014). Interest Rates As the call for cycling adoption heightens, local authorities in different cities are operating under pressure to plan for and deliver routes linking different amenities within them (Harker, 2014). Such demands translate to higher costs for companies investing in such cities so as to benefit from business, health, pollution, and congestion benefits resulting from strategies such as Cycling and Walking Investment. Social Factors Health Conscious According to Hill (2013) statistics reveal that the adoption of bicycle increases the number of critical injuries and deaths, raising the figure to about five times higher than five years earlier. This translates to slow adoption of bicycles by the UK population, and greater investment in marketing for Bianchi hence slow penetration into the market. Technological Factors Inman (2014) revealed with increasing anticipation amongst businesses that the UK economy will eventually recover, businesses have adopted IT systems, machinery, and increased their marketing budgets. IT systems also influence the time to deliver bicycle models into the market and the best bicycle quality to sustain competition. Impacts of PEST analysis on UK’s Bicycle Market on Bianchi Political factors Cycling Incentive Given the upcoming elections in the UK, Bianchi will have to delay its investment in the UK market as this translates to exposure to a fragile business environment given high political risks. However, with the tax incentives cycle commuting, Biachi’s presence would get hold of the growing number of bicycle enthusiasts and manage to establish a strong customer base (Allan, 2012). For instance, a 20p tax reduction per mile is granted to employees using bicycles for work. Based on the revelation of Hill (2013), the UK presents an environment with ready infrastructure that promotes cycling and this means that with the right bicycle designs, there is a potential market for its bicycles. Additionally, the UK market’s cycling culture is expected to influence both the young and the old who will adopt Bianchi’s bicycles. Government Investment With the completion of the first phase of cycling investment terminating in 2015, the UK market offers a great opportunity that more and more people will seek for bicycles. This means less funds are needed to facilitate the development of infrastructure; it also widens the customer base since the investment includes several cities which are a high potential market for Bianchi. In London. For instance, Bianchi’s investment is significant given the vision and strategy to promote safer streets for bike users. London can serve as a starting point for Bianchi’s UK presence establishment given additional focus on better superhighways, quiet ways, and cycle hire amongst other factors. Economic factors Inflation Rate Given the gradual improvement in the inflation level in the UK market, the implication is that Bianchi’s bicycle sales will only attract a few families whose disposable incomes are high and are willing to adopt cycling. Understanding the disposable income levels will assist in determining the target market. Additionally, high inflation rates mean higher prices of raw materials and this may run through several years as the UK economy tries to regain (BBC, 2014). Interest rates As more UK cities heed to the call to promote cycling, the end result is higher costs of investment and sustenance of new businesses. Higher investment costs are due to the fact that Bianchi will also benefit from the resulting lesser congested cities, and safer cities for the cyclers and the public. Lesser congestion will also involve regulating bicycles through the use of plate numbers to curb rogue riders. Social Factors Health Consciousness With increasing number of casualties and deaths arising from cycling, Bianchi has to invest more in bicycle design and this would result to delayed entry into the market as the best design is tested, and designed for optimal performance (Hill, 2013). Attitude towards Careers Conversely, as cycling gains momentum, the requirement for Bianchi would be to adopt such policies and make necessary changes such as providing bicycle parking facilities for employees. This translates to mean that Bianchi requires higher capital to invest in infrastructure. Additionally, it would require additional investment in cycle safety and security promotion and provision of relevant cycling information to employees and employees to reduce the number of casualties (Millward, 2012). The major cycle related injury employees need to be aware of is being knocked off the bike and getting hurt. However, (Department for Transport (2013, p. 11) reveals that the government efforts to deal with cycle casualties are reduced through increasing cycling provision; sufficient training for cyclers; promoting a road-sharing culture amongst different road users; and liaising with local authorities such that they can design roads with improvements that utilize techniques and tools for traffic management. Technological factors Given the high anticipation of a growing gross domestic product (GDP), Bianchi will require a higher budget and more investment in market research to understand the IT systems adopted and allowed within the UK territory for bicycle production. Conclusion and Recommendation The PEST analysis of the UK cycling market reveals that the UK is a viable investment market given government incentives to cyclers, and government investment to improve cycling condition and lessen casualties. However, the market indicates resistance to adoption of cycling given the high number of casualties, high inflation, reducing disposable incomes amongst families, and high investment costs. I recommend that Bianchi takes time to invest in this market. For instance, the market requires additional research to identify the best bicycle designs that would be less expensive but that provide safe bicycles for riders. Again, Bianchi needs to avoid the political risks associated with 2015’s general elections and delay its investment after which they can begin with London before spreading to other large cities. Bibliography Allan, C., 2012. Tax incentives. Cyclists Touring Club, 15 March. BBC, 2014. Economy tracker: Inflation. BBC, 18 November. Burgess, K., 2014. Bicycle number plates demanded to stop rogue riders. The Times, 9 October. Carpenter, M. & Dunung, S., 2012. Challenges and Opportunities in International Business. 1st ed ed. United States: Creative Commons. Department for Transport, 2013. Briefing on the Governments Ambition for Cycling. [Online] Available at: www.gov.uk/dft [Accessed 2014 November 2014]. Harker, J., 2014. Will the House of Lords step in to halt cycle investment decline?. [Online] Available at: http://www.bikebiz.com/news/read/will-the-house-of-lords-step-in-to-halt-cycle-investment-decline/017063 [Accessed 26 November 2014]. Hill, J., 2013. Cycling gets £94m push in England. [Online] Available at: http://www.bbc.com/news/uk-23657010 [Accessed 26 November 2014]. Inman, P., 2014. Disposable incomes will not rise for average family until 2015. The Guardian, 11 February. Kramer, B. & Goodwill, R., 2012. Policy: Improving local transport. [Online] Available at: https://www.gov.uk/government/policies/improving-local-transport/supporting-pages/encouraging-people-to-cycle [Accessed 26 November 2014]. Millward, D., 2012. Biggest investment in cycling announced by Government. Morning News, 28 November. Read More